Outside the US and Europe there’s less talking, more doing; China sanctions seem an inconvenience, little more

Employees work at the headquarters of the world’s largest semiconductor maker, TSMC, in Hsinchu, Taiwan. Photo: AFP / Sam Yeh

Semiconductor Manufacturing International Corp (SMIC), China’s largest integrated circuits foundry, has announced plans to build a new $8.9 billion factory in Shanghai to produce semiconductors at the 28-nanometer node.

That level of technology is suitable for automotive ICs and other semiconductor products that are currently in short supply. It is several generations behind the leading edge, which is now at 5-nanometer and moving to 3-nanometer at Taiwan Semiconductor Manufacturing Company (TSMC).

The 28-nanometer node is not targeted by American economic sanctions, which are aimed at preventing China from acquiring production technologies for 10-nanometer and smaller design rules.

SMIC’s announcement on September 3 followed TSMC’s decision to spend $2.8 billion to expand 28-nanometer production at its factory in Nanjing. This project was approved by the Taiwanese government in July.

Both SMIC and TSMC Nanjing have recently been running at full capacity. Their new investments should help ease the semiconductor shortage while reducing Chinese demand for imported semiconductors.

SMIC plans to form a joint venture to build and operate the new facility. SMIC will reportedly own at least 51% of the venture; the government of Shanghai will own 25%; and other investors will be solicited for the remainder.

SMIC could finance its share out of cash on hand if it had to, but it appears to have plenty of room to borrow. At the end of June, the company had US$7.2 billion in cash and equivalents, total debt of $6.0 billion, total assets of $32.2 billion and shareholders equity $22.8 billion.

At full capacity, the new Shanghai factory will be capable of processing 100,000 12-inch (300mm) wafers per month, or nearly 40% of SMIC’s current capacity (not adjusted for the ownership ratio). Barring unforeseen problems, the production equipment is likely to be installed in 2024.

Logo of Semiconductor Manufacturing International Corporation, a partially state-owned publicly-listed Chinese semiconductor foundry company and the largest of its kind in mainland China, is seen on the facade of a building of its factory in Beijing. Photo: AFP /Huang Yong / Imaginechina